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“A Plain-Meaning Analysis of the ERC”

November 6, 2023

Tom Cullinan and Sam Kuzniewski's article “A Plain-Meaning Analysis of the ERC” in Tax Notes Federal

Tax Notes Federal

In an article published in Tax Notes on November 6, 2023, Shareholder Tom Cullinan and Associate Sam Kuzniewski discuss how courts might address employee retention credit restrictions under a plain-meaning analysis given the varying degrees of restrictions in IRS guidance and statutory language.

The first three paragraphs of the article are included below with permission from the publication. To read the full article, subscribers may click here.

Congress enacted the employee retention credit in 2020 as part of the Coronavirus Aid, Relief, and Economic Security Act. As modified by subsequent enactments, the ERC was a refundable credit of up to $26,000 per employee, available to employers who kept employees on payroll and met certain requirements. The ERC was terminated for most employers as of September 30, 2021, but the law allows employers to file refund claims for 2020 credits until April 15, 2024, and to file refund claims for 2021 credits until April 15, 2025.

The original law was enacted quickly, and there is no legislative history. The IRS has worked hard to provide guidance, most notably in Notice 2021-20, 2021-11 IRB 922 (applied to quarters in 2021 by Notice 2021-23, 2021-16 IRB 1113). While helpful, some of that guidance is arguably more restrictive than the statutory language. This article considers how the courts might address such restrictions under a plain-meaning analysis, using the “partially” suspended test as an example.

The Supreme Court has explained that “the plain meaning of legislation should be conclusive, except in the rare cases in which the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.” Thus, when statutory terms are not defined by statute or regulation, courts will give those statutory terms their “plain meaning,” often using dictionaries. For example, the Supreme Court recently cited three different dictionaries to define “money” under the Railroad Retirement Tax Act.

To view the full article, subscribers may click here.